Coinbase CEO Faces Lawsuit for Dumping Stock and Avoiding $1 Billion in Losses
One of the world’s largest cryptocurrency exchanges Coinbase has been recently slapped with a lawsuit along with chief executive Brian Armstrong, board member Marc Andreessen, and other company executives.
An investor at the company has filed a lawsuit in the Delaware Chancery Court on Monday, May 1, noting that Coinbase and executives avoided more than $1 billion in losses by using insider information and selling stocks just days within its public listing two years back.
The lawsuit alleges that the company’s board deployed a direct listing instead of going for an initial public offering (IPO) while rapidly selling off more than $2.9 billion in stocks before the Coinbase management revealed “material, negative information that destroyed market optimism from the company’s first quarterly earnings release forward”.
Investor Adam Grabski, who claims to hold the Coinbase stock since April 2021 stated that “Within five weeks, those shares declined in value by over $1 billion, and Coinbase’s market capitalization plummeted by more than $37 billion”.
As per the complaint filed by Grabski, Coinbase CEO Brian Armstrong sold a total of $291.8 million worth of COIN stock as part of the direct listing. Similarly, venture capital giant Andreessen Horowitz, also offloaded $118.6 million worth of the stock.
In an email statement to Insurance Journal, Coinbase noted: “As the most popular and only publicly traded crypto exchange in the US, we are at times the target of frivolous litigation. This is an example of one of those meritless claims.”
In the derivative complaint filed, the investor seeks the return of “ill-gotten gains” from Armstrong and Andreessen. The development comes just at a time when crypto exchange Coinbase has been embroiled in a legal battle with the U.S. Securities and Exchange Commission (SEC).
Besides, Coinbase is also facing yet another lawsuit this week over charges of illegally collecting customers biometric information - such as face templates and fingerprints - thus violating Illinois’ biometric privacy law.
The lawsuit notes that crypto exchange Coinbase harvests facial information from copies of government-issued IDs and selfies required to upload at the time of the sign up process. It also accuses Coinbase of harvesting fingerprint data whenever customers log in to their account using the required fingerprint scanning technology.
The complaint notes: “Coinbase has created, collected, and stored thousands of ‘face templates’ – highly detailed geometric maps of the face – and fingerprints from countless Illinois residents”. It adds that the collection of this data exposes users to “serious and irreversible privacy risks,” including identity theft, in the case of data breach.